International Journal of Business

Management & Research (IJBMR)

ISSN (P): 2249-6920; ISSN (E): 2249-8036
Vol. 9, Issue 2, Apr 2019, 1-12
© TJPRC Pvt. Ltd.

DOMESTIC FUEL PRICE HIKE AND PURCHASE OF CARS IN

WILAYAT OF NIZWA SULTANATE OF OMAN –

A FACTOR ANALYSIS APPROACH

RADHAKRISHNAN SUBRAMANIAM1, HARITH AHMED AL-BALHASANI2 &

MOHAMMED ALI AL-BUSAIDI3
1
Lecturer, Nizwa College of Technology, Wilayat of Nizwa, Sultanate of Oman
2,3
Student, Nizwa College of Technology, Wilayat of Nizwa, Sultanate of Oman
ABSTRACT

Hike in domestic oil prices can impact an economy at the micro level and macro level. This study aims at
identifying the overriding factors that influence an existing or prospective consumer in their car purchase decision.
A sample of 366 respondents holding driving license were taken for the study from Nizwa, Sultanate of Oman.
The analysis revealed that the domestic fuel price has affected the respondents in terms of transportation costs, usage of
car, cost of other commodities in the market, petrol consumption, decision making with regards to purchase of cars and

Original Article
price of domestic gas.

KEYWORDS: Economy, Oil Prices, Price Hike & Automobile Industry

Received: Jan 31, 2019; Accepted: Feb 20, 2019; Published: Mar 13, 2019; Paper Id.: IJBMRAPR20191

INTRODUCTION

Oil based economies depend much on the revenue generated by the production, refinement and sale of oil
to economies that import oil. Oil is a necessity to produce and transport many other goods. A major usage of oil
goes into consumer automobiles. Therefore, all the developing circumstances around the oil economy will have a
major impact on other sectors of the economy. Oil and fuel prices are rising in Oman, since January 2016.
A resident of Oman will notice up to a more than 80% (a jump from 0.120 RO to 0.218 RO) increase in the price of
petrol in spite of Oil prices in the market being low. The cost of petrol at the pump has increased by almost 75 per
cent since the government scrapped its fixed-price policy in January 2016 – from 120 baisa before the policy was
scrapped to 186 baisa in February 2017. (Silvia Razgova, The National, February, 2017). Oman’s government has
announced plans to introduce a new fuel subsidy scheme for low-income Omanis starting from January 2018.
The Government’s decision aims to ensure the welfare of citizens. As per this mechanism, Omani citizens who
meet eligibility requirements will get 200 litres per month of M91 petrol at a cost of not more than 180 baisa per
litre. The mechanism relies on a system that connects the Royal Oman Police’s system with fuel marketing
companies to ensure accuracy and smooth implementation. This scheme is applicable to Omani citizens above the
age of 18, who own in their names a vehicle registered with Royal Oman Police or a fishing boat registered with
the Ministry of Agriculture and Fisheries - if their total monthly income from all sources is not more than 600
riyals. (Fahad Al Mukrashi, The Gulf News, December, 2016).

In spite of citizens’ welfare schemes launched by the Sultanate’s Government, total vehicle registrations

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2 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
Mohammed Ali Al-Busaidi

in the Sultanate dropped by 18.3 percent to 73,798 during the first eleven months of 2017, and that is below 90,329
registrations for the corresponding period in 2016. (A E James, Times of Oman, January 2018)

REVIEW OF LITERATURE

Volatile oil prices adversely affect transport sector. Therefore, it might be worthwhile to simulate the effects of a
significant and durable change in oil price on transport cost, transport demand, and transport externalities
(Jacques Delsalle, 2002). Global demand for oil has been and is attributed largely on rapidly developing nations, especially
China and India. These economies have become increasingly industrialized and urbanized and have contributed to an
increase in the world demand for oil. In addition, in recent years fears of supply disruptions have been spurred by turmoil
in oil-producing countries such as Nigeria, Venezuela, Iraq, and Iran (Brown 2006). Upsurge in petrol price has a rippling
effect as all merchandises are transported on vehicles that run on petrol or diesel. So, increase in petrol price results in price
rise of merchandises as well. The common man of the nationsuffers the maximum impact, bears the gravity of inflation and
any escalation in petrol price will further shrink the real household disposable income. If the petrol price keeps swelling,
then every other item demanded by the household will also get costlier resulting in fewer saving and more expenditure
consequently affecting the real estate, banking and other sectors in an economy (Ramandeep Kaur, 2013). According to a
Government survey by National Centre for Statistics and Information (NCSI) in Oman, 45 % of Omanis stated that the rise
in fuel prices has had a significant effect on them and 34 %of Omanis believe that altering the fuel prices has negatively
impacted the country. (NCSI, July 2016). Sultanate of Oman’s oil and gas reserves are relatively less than its counterparts
in GCC. A steep fall in oil prices in the later part of 2014 necessitated Oman Government to take bold steps to boost
revenues from non-oil sources viz. revising electricity & water tariffs for commercial and industrial users, increasing fees
for government services including: licenses and labor cards, vehicle registration, real-estate transactions and land
allocation, 35 % tax on petrochemical firms, subsidy cuts, reduced benefits for public sector workers, doubling of gas
prices for industrial users, local fuel prices being brought in tandem with global prices, increase in corporate income tax
rate from 12 % to 15 % approved by the Shura Council (World Bank, IBRD.IDA, July, 2016). Increase in fuel prices have
increased the prices of many commodities resulting in upward shift in cost of living, monthly expenditure and the general
public is recognizing the importance of public transport system and carpooling to reduce cost of transportation that has
adversely affected the economy (Muscat daily, May 2018).

Statement of the Problem

Hike in domestic oil prices has adversely affected all the citizens and particularly low income families.
This has caused a strain on house hold disposable income and affected the monthly budget, pushing the common man to
cut down on his: leisure trips, eating out habits, recreational activities, and medical services and forcing families to stay at
home. Given this backdrop, hybrid cars, that are known to produce less emission and running on green technology, may
gain popularity in spite of its high cost. Therefore, auto makers are in the process of innovation and pushing towards
hybridization of cars and are considered the answer to highest cost ownership in terms of fuel consumption.
Hybrid cars/vehicles are not independent of disadvantages. Sultanate of Oman needs to step up its infrastructure to support
this technology. Therefore, petrol and diesel vehicles are cost effective till date. Therefore, the common man is forced to
consider his budget and identify a vehicle that fits his pocket. There have been enough studies on domestic fuel price hike
and its impact on society, but impact of domestic fuel price hike on purchase of cars in Wilayat of Nizwa in Oman is not
been carried out and to that extent the study is relevant.

Impact Factor (JCC): 7.3125 NAAS Rating: 3.43

Domestic Fuel Price Hike and Purchase of Cars in Wilayat of Nizwa 3
Sultanate of Oman a Factor Analysis Approach

OBJECTIVES OF THE STUDY

• To identify major factors/variables that influences car purchase decisions due to domestic fuel price hike in Oman.

• To develop a model of factors/variables that create an impact car purchase of the population under study in the
light of domestic fuel price hike in Oman.

SCOPE OF THE STUDY

The purpose of the study is to understand the impact of domestic fuel price hike in the Sultanate on sale of cars in
Wilayat of Nizwa and provide appropriate recommendations to automobile marketers to address concerns of customers.
This study will help the prospective customers that intend purchasing cars to make informed decisions in the light of steep
fuel price hike. This study will also help marketers to target prospective customers with offers that address the issue of fuel
price hike and a possible solution to the customers in terms of the vehicles’ improved mileage/fuel economy.

RESEARCH METHODOLOGY

An exploratory study is conducted among the four wheeler license holders in Al Dakhliya Region of Sultanate of
Oman. The sampling frame comprises of 32,000 people in the Wilayat of Nizwa holding a valid driving license. Subjects
without a valid driving license were excluded from the study as they are not likely to make a decision to purchase vehicles
in the foreseeable future. A sample of 366 (Krejice and Morgan, 1970) responded to the instrument. A structured
questionnaire was used to obtain primary data. Convenience sampling technique was used. Statements containing Likert’s
Five Point scale was used. The reliability of the instrument is calculated at the Cronbach’s Alpha value is 0.830.
The response is 100 %, and therefore 366 filled responses in the Google forms were taken up for the study. Factor analysis
was used to identify the core variables that create an impact on the sale of cars in Wilayat of Nizwa. The period of study
was from January 2018 to December 2018.

RESULTS AND DISCUSSIONS

Descriptive Statistics

A sample of 366 responses was obtained from form nearly 32,000 driving license holders in Wilayat of Nizwa.
The demographic profile of the sample respondents are briefly explained as follows. 32 % of respondents are females and
remaining 68% are males. Comparing the age group of respondents, 34 % belong to the age group of 20-30 years. 38 % of
the respondents are in the age group of 31-40 years. 17 % of respondents belong to the age group 41-50 etc.
Of the total respondents taken up for the study, 86 % of respondents already own vehicles/cars and the remaining 14 % of
respondents do not own vehicles. 22 % of respondents belong to the income bracket less than RO 500, 41 % of respondents
belong to the income bracket RO 500-1000, and 21 % of respondents belong to income bracket 1001-1500. This is shown
in table 1

Table 1: Demographic Profile of Respondents

Number of
Respondents’ Profile Percentage
Respondents
Male 249 68
Gender Female 117 32
Total respondents 366 100
21 – 30 125 34
Age group
31 – 40 139 38

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4 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
Mohammed Ali Al-Busaidi

41 – 50 62 17
51 – 60 33 9
61 – 70 7 2
Total respondents 366 100
Owners 315 86
Ownership of vehicles/cars Non - owners 51 14
Total respondents 366 100
< 500 OMR 80 22
501 – 1000 OMR 154 42
1001 – 1500 OMR 77 21
Income group
1501 – 2000 OMR 29 8
2001 – 2500 OMR 15 4
2501 – 3000 OMR 11 3

The first output from the factor analysis is the table of descriptive statistics of the variables under investigation.
This is provided in Table 1. The mean and standard deviation of the 366 respondents that participated in the survey are
given. From the Mean values, it can be concluded that the respondents consider that there is a strong relationship between
the commodity prices and petrol/fuel price (X17). It has the highest mean of 3.86 on a scale of 5. The second most
important factor is found to be the need to switch over to cheaper fuel if the petrol/fuel price keeps rising (X16), followed
by X15 and X14that states that the residents of Wilayat of Nizwa consider petrol price to the overriding factor (X14) and
think twice before making a high end car purchase decision (X15), respectively

Table 2: Descriptive Statistics of the Variables in the Study

Std.
S. No Statements Mean
Deviation
1 Crude oil prices are low in the international market. (X1) 2.49 1.46
2 Gulf countries depend on oil revenue from its exports.(X2) 3.52 1.28
3 I am aware of the factors that determine petrol prices in international market.(X3) 2.88 1.26
4 There has always been a salary increase in my employment every year.(X4) 2.24 1.13
5 Petrol/fuel price rise have increased the transportation costs for the public.(X5) 3.45 1.22
6 Petrol/fuel price rise have not affected my usage of car.(X6) 2.35 1.12
7 Petrol/fuel price rise have not bothered me economically.(X7) 2.35 1.09
8 Petrol/fuel price rise does not affect price of other commodities.(X8) 2.22 1.06
9 Petrol/fuel consumption of the car is a concern for car owners.(X9) 2.87 1.29
10 It is becoming difficult to own a car in the light of petrol/fuel price rise.(X10) 3.06 1.20
11 Petrol/fuel price rise stops me to plan for purchasing a new car.(X11) 3.17 1.18
12 Public transport system in Oman is good.(X12) 2.90 1.09
13 There are alternate transport facilities available for the public other than cars.(X13) 3.01 1.22
Petrol/fuel consumption is the most important factor in deciding the purchase of a
14 3.72 1.26
car.(X14)
The residents in Wilayat of Nizwa think twice before making a decision to purchase
15 3.78 1.23
a high end car due to petrol/fuel price rise.(X15)
16 There is a need to switch over to cheaper fuel for if prices keep increasing.(X16) 3.79 1.21
17 There is a strong relationship between fuel prices and prices of commodities.(X17) 3.86 1.20
18 Petrol/fuel price rise may result in rise in price of domestic gas.(X18) 3.23 1.24
Oil price fall in the international market have resulted in the withdrawal of
19 3.05 1.18
Government subsidy on electricity.(X19)
Oil price fall in the international market have resulted in job cuts in many sectors as
20 3.03 1.27
production goods and services are badly hit.(X20)
Oil price fall in the international market have resulted in lower investment in
21 2.98 1.19
infrastructure projects in Oman(X21)
Petrol/fuel price for domestic consumption have been increased to bridge the deficit,
22 3.37 1.20
due to oil price fall in the international market.(X22)

Impact Factor (JCC): 7.3125 NAAS Rating: 3.43

Domestic Fuel Price Hike and Purchase of Cars in Wilayat of Nizwa 5
Sultanate of Oman a Factor Analysis Approach

Kaiser-Meyer-Olkin Barlett Measure of Sampling Adequacy

Table 3 shows the important parts of SPSS output; Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy
and Bartlett’s Test of Sphericity. The KMO statistics varies between 0 and 1. A value of 0 indicates that the sum of the
partial correlations is large relative to the sum of correlations, indicating diffusion in the pattern of correlations. Hence, a
factor analysis is inappropriate. A value close to 1 indicates that pattern of correlations are relatively compact and so factor
analysis should yield a distinct and reliable results. Kaiser (1974) recommends values lesser than 0.49 are unacceptable,
values greater than 0.5 to 0.59 as miserable. Values between 0.6 and 0.69 are mediocre, values between 0.7 and 0.79 are
middling, values between 0.8 and 0.89 are meritorious and values between 0.9 and 1.00 to be marvelous.

For the data collected for this research, the value is 0.843 and is considered as meritorious and hence the data
comfortably qualifies to conduct factor analysis (Principal Component Analysis).

Table 3: KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling
.843
Adequacy.
Approx. Chi-Square 3506.495
Bartlett's Test of
df 231
Sphericity
Sig. .000

Bartlett’s measure tests the null hypothesis that the original correlation matrix is an identity matrix. For factor
analysis to work there must be some relationships, and if R-Matrix is an identity matrix, then all correlation coefficients
would be zero. A significance test tells that the R – Matrix is not an identity matrix; therefore, there are some relationships
between variables. In the data collected for the study, Bartlett’s test is highly significant (0.000) and therefore the factor
analysis (Principal Component Analysis) is considered appropriate.

Correlation Matrix

Correlation matrix investigates the dependence between multiple variables at the same time. The result is a table
containing the correlation coefficients between each variable and the other variables. SPSS by default gives out Pearson
Correlation Coefficient and it measures the linear dependence between two variables. Kendall and Spearman Correlation
methods are non-parametric(conditional) rank-based correlation test.

Communalities

Principal Component Analysis works on the initial assumption that all variance is common. Therefore, before
extraction, the communalities are all 1. The communalities in the column labelled extraction reflect the common variance
in the data structure. Communalities explain the variance in common and are implied on a scale of 1. If the value of
communality is more than 0.6, then it will cause a good factor loading.

Table 4: Communalities
S. No Statements/Factors/Variables Initial Extraction
1 Crude oil prices are low in the international market. (X1) 1 0.671504
2 Gulf countries depend on oil revenue from its exports.(X2) 1 0.607992
3 I am aware of the factors that determine petrol prices in international market.(X3) 1 0.654281
4 There has always been a salary increase in my employment every year.(X4) 1 0.480317
5 Petrol/fuel price rise have increased the transportation costs for the public.(X5) 1 0.482855
6 Petrol/fuel price rise have not affected my usage of car.(X6) 1 0.645122

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6 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
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Table 4: Contd.,
7 Petrol/fuel price rise have not bothered me economically.(X7) 1 0.729998
8 Petrol/fuel price rise does not affect price of other commodities.(X8) 1 0.640918
9 Petrol/fuel consumption of the car is a concern for car owners.(X9) 1 0.339373
10 It is becoming difficult to own a car in the light of petrol/fuel price rise.(X10) 1 0.509258
11 Petrol/fuel price rise stops me to plan for purchasing a new car.(X11) 1 0.688117
12 Public transport system in Oman is good.(X12) 1 0.539308
13 There are alternate transport facilities available for the public other than cars.(X13) 1 0.487302
Petrol/fuel consumption is the most important factor in deciding the purchase of a
14 1 0.707482
car.(X14)
The residents in Wilayat of Nizwa think twice before making a decision to purchase
15 1 0.750578
a high end car due to petrol/fuel price rise.(X15)
16 There is a need to switch over to cheaper fuel for if prices keep increasing.(X16) 1 0.755527
17 There is a strong relationship between fuel prices and prices of commodities.(X17) 1 0.724974
18 Petrol/fuel price rise may result in rise in price of domestic gas.(X18) 1 0.631391
Oil price fall in the international market have resulted in the withdrawal of
19 1 0.728407
Government subsidy on electricity.(X19)
Oil price fall in the international market have resulted in job cuts in many sectors as
20 1 0.715128
production of goods and services are badly hit.(X20)
Oil price fall in the international market have resulted in lower investment in
21 1 0.721105
infrastructure projects in Oman(X21)
Petrol/fuel price for domestic consumption have been increased to bridge the deficit,
22 1 0.552363
due to oil price fall in the international market.(X22)

75.5 % of the variance is attributed to the statement “There is a need to switch over to cheaper fuel for if prices
keep increasing (X16)”. 75 % of the variance is attributed to the statement “The residents in Wilayat of Nizwa think twice
before making a decision to purchase a high end car due to petrol/fuel price rise(X15)”. 72.8 % of the variance is attributed
to the statement “Oil price fall in the international market have resulted in the withdrawal of Government subsidy on
electricity (X19)”.

Factor Extraction

The SPSS output in table 5 lists the Eigen values associated with each linear factor before extraction, after
extraction and after rotation. Before extraction, SPSS has identified 22 linear components with in the data set. The Eigen
values associated with each factor represent the variance explained by that particular linear component and SPSS also
displays Eigen values in terms of percentage of variance explained. So, factor 1 (Crude oil prices are low in the
international market) explains 25.477% of total variance. SPSS extracts all the factors with Eigen values greater than 1 that
leaves with five factors. The Eigen values associated with these factors are displayed in the column labeled percentage of
variance. The values in the extracted sum of sum of squared loadings are the same as the values before extraction, except
that the values for the discarded factors (after five factors) are ignored. In the rotation sums of squared loadings, the Eigen
values of the factors after rotation are displayed. Before rotation, factor 1 accounted for more variance (25.477 %), than the
remaining four factors. However, after extraction/rotation, it accounts for only 16.67 % of variance. Similarly, factor 2
(Gulf countries depend on oil revenue from its exports) accounts for 13.87 % of the variance. Thus, 62.56 % of the
cumulative variance is contributed by the first 5 variables (X1, X2, X3, X4 and X5) and remaining factors contribute only
37.44 % of cumulative variance.

Impact Factor (JCC): 7.3125 NAAS Rating: 3.43

Domestic Fuel Price Hike and Purchase of Cars in Wilayat of Nizwa 7
Sultanate of Oman a Factor Analysis Approach

Table 5: Factor Extraction -Total Variance Explained

Extraction Sums of Squared Rotation Sums of Squared
Initial Eigenvalues
Loadings Loadings
Component
% of Cumulative % of Cumulative % of Cumulative
Total Total Total
Variance % Variance % Variance %
X1 5.605 25.477 25.477 5.605 25.477 25.477 3.667 16.670 16.670
X2 3.804 17.290 42.767 3.804 17.290 42.767 3.051 13.870 30.540
X3 1.702 7.737 50.504 1.702 7.737 50.504 2.764 12.563 43.103
X4 1.597 7.257 57.760 1.597 7.257 57.760 2.424 11.018 54.122
X5 1.056 4.800 62.560 1.056 4.800 62.560 1.857 8.439 62.560
X6 .909 4.134 66.694
X7 .878 3.992 70.686
X8 .725 3.297 73.983
X9 .662 3.010 76.993
X10 .625 2.840 79.833
X11 .539 2.450 82.284
X12 .519 2.357 84.641
X13 .506 2.298 86.939
X14 .465 2.114 89.053
X15 .417 1.898 90.950
X16 .367 1.668 92.619
X17 .347 1.578 94.197
X18 .287 1.306 95.503
X19 .282 1.283 96.787
X20 .259 1.179 97.965
X21 .231 1.051 99.016
X22 .216 .984 100.000

Scree Plot

The Scree plot is a graph that shows the Eigen values against all factors/variables extracted by SPSS. Factors with
Eigen value more than one are considered as statistically reliable factors.

Graph 1: Scree Plot

From the scree plot, five factors are identified with Eigen value more than one. The factors that cause the variance
are explained with the help of a steep fall of the curve. Steep fall explains high variance and flat part of the curve shows the
low variance it can be understood by comparing the table 5(Factor extraction) and graph 1 (Scree plot).

Component Matrix – Before Rotation

The component matrix – before rotation shown in table 6, contains the loadings of each factor into each factor.
All the loadings less than 0.6 are suppressed in the output and hence there are blank spaces for many of the loadings.
The table 7 shows the loadings (extracted values of each item under 2 variables) of 22 variables/factors on the 2 factors
extracted. The higher absolute value of the loading, the more the factor contributes to variable. 2 variables are extracted,

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8 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
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wherein the 22 variables are divided into 2 variables according to the most important items with similar response in
component 1 and 2. At this stage, SPSS extracted only two factors. However, according to Kaiser’s criterion, five factors
are to be extracted and are considered accurate. It is considered accurate when the average communalities is greater than
0.62. The average of the communalities is found by adding the communalities divided by the number of factors
(13.7633/22 = 0.6256). Thus, on both the grounds, Kaiser’s rule is accurate. Therefore, the researchers subjected the data to
be rotated to arrive at five factors/variables, on which other factors can be conveniently loaded.

Table 6: Component Matrix– Before Rotation

Component
Factors/Variables
1 2 3 4 5
Crude oil prices are low in the international market. (X1) .700
Gulf countries depend on oil revenue from its exports.(X2) .681
I am aware of the factors that determine petrol prices in international market.(X3) .678
There has always been a salary increase in my employment every year.(X4) .666
Petrol/fuel price rise have increased the transportation costs for the public.(X5) .648
Petrol/fuel price rise have not affected my usage of car.(X6) .633
Petrol/fuel price rise have not bothered me economically.(X7) .629
Petrol/fuel price rise does not affect price of other commodities.(X8) .620
Petrol/fuel consumption of the car is a concern for car owners.(X9)
It is becoming difficult to own a car in the light of petrol/fuel price rise.(X10)
Petrol/fuel price rise stops me to plan for purchasing a new car.(X11)
Public transport system in Oman is good.(X12)
There are alternate transport facilities available for the public other than cars.(X13)
Petrol/fuel consumption is the most important factor in deciding the purchase of a
car.(X14)
The residents in Wilayat of Nizwa think twice before making a decision to purchase
.747
a high end car due to petrol/fuel price rise.(X15)
There is a need to switch over to cheaper fuel for if prices keep increasing.(X16) .685
There is a strong relationship between fuel prices and prices of commodities.(X17) .683
Petrol/fuel price rise may result in rise in price of domestic gas.(X18)
Oil price fall in the international market have resulted in the withdrawal of
Government subsidy on electricity.(X19)
Oil price fall in the international market have resulted in job cuts in many sectors as
production ods and services are badly hit.(X20)
Oil price fall in the international market have resulted in lower investment in
infrastructure projects in Oman(X21)
Petrol/fuel price for domestic consumption have been increased to bridge the deficit,
due to oil price fall in the international market.(X22)
Extraction Method: Principal Component Analysis.
a. 5 components extracted, but only two components are above 0.6. This is due to the total factor
extraction and variance explained is above 0.62.

Factor Rotation

In order to interpret the factors, a procedure called Rotation is often used. The concept of rotation is to reduce the
number of factor, on which the variables under study have high level of loadings. This procedure gives out a matrix of
factor loadings for each variable onto each factor after rotation. The researchers used Varimax Orthogonal Rotation to
achieve uncorrelated factorsin the analysis. The factor loadings that were obtained after the rotation is laid out in the
following columns labelled as Rotated Component Matrix.

Impact Factor (JCC): 7.3125 NAAS Rating: 3.43

Domestic Fuel Price Hike and Purchase of Cars in Wilayat of Nizwa 9
Sultanate of Oman a Factor Analysis Approach

Table 7: Rotated Component Matrix

Component
Rotated Component Matrix
1 2 3 4 5
Crude oil prices are low in the international market. (X1) .821
Gulf countries depend on oil revenue from its exports.(X2) .820
I am aware of the factors that determine petrol prices in international
.820
market.(X3)
There has always been a salary increase in my employment every year.(X4) .806
Petrol/fuel price rise have increased the transportation costs for the public.(X5)
Petrol/fuel price rise have not affected my usage of car.(X6)
Petrol/fuel price rise have not bothered me economically.(X7) .815
Petrol/fuel price rise does not affect price of other commodities.(X8) .815
Petrol/fuel consumption of the car is a concern for car owners.(X9) .804
It is becoming difficult to own a car in the light of petrol/fuel price rise.(X10) .730
Petrol/fuel price rise stops me to plan for purchasing a new car.(X11)
Public transport system in Oman is good.(X12) .827
There are alternate transport facilities available for the public other than
.787
cars.(X13)
Petrol/fuel consumption is the most important factor in deciding the purchase of
.772
a car.(X14)
The residents in Wilayat of Nizwa think twice before making a decision to
.671
purchase a high end car due to petrol/fuel price rise.(X15)
There is a need to switch over to cheaper fuel for if prices keep increasing.(X16) .760
There is a strong relationship between fuel prices and prices of
.685
commodities.(X17)
Petrol/fuel price rise may result in rise in price of domestic gas.(X18) .659
Oil price fall in the international market have resulted in the withdrawal of
.649
Government subsidy on electricity.(X19)
Oil price fall in the international market have resulted in job cuts in many sectors
.788
as production goods and services are badly hit.(X20)
Oil price fall in the international market have resulted in lower investment in
.703
infrastructure projects in Oman(X21)
Petrol/fuel price for domestic consumption have been increased to bridge the
.694
deficit, due to oil price fall in the international market.(X22)
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.a
a. Rotation converged in 7 iterations.

There are five components identified by the SPSS and the factor loadings are represented in table 5. The factor
rotation procedure resulted in the following factors.

There werefour variables (X1, X2, X3, X4)heavily loaded on to the first factor and it relates to:Crude oil prices
are low in the international market (X1), Gulf countries depend on oil revenue from its exports (X2), I am aware of the
factors that determine petrol prices in international market(X3), There has always been a salary increase in my employment
every year(X4). Therefore, the first factor is labelled as “Crude oil prices, revenues in the international market and income
level of consumers”.

The four variables (X7, X8, X9& X10) that loads heavily on the second factor relates to: Petrol/fuel price rise
have not bothered me economically (X7), Petrol/fuel price rise does not affect price of other commodities(X8), Petrol/fuel
consumption of the car is a concern for car owners(X9) &It is becoming difficult to own a car in the light of petrol/fuel
price rise(X10). Therefore, the second factor is labelled as “Petrol price rise and car ownership”.

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10 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
Mohammed Ali Al-Busaidi

The variables (X12, X13, X14, X15) that loads heavily on the third factor relates to: Public transport system in
Oman is good (X12), There are alternate transport facilities available for the public other than cars (X13), Petrol/fuel
consumption is the most important factor in deciding the purchase of a car (X14) & The residents in Wilayat of Nizwa
think twice before making a decision to purchase a high end car due to petrol/fuel price rise (X15). Therefore, the third
factor is labelled as “Public transport system and decision to purchase cars”.

The variables (X16, X17, X18, X19) that loads on the fourth factor relates to: There is a need to switch over to
cheaper fuel for if prices keep increasing (X16), There is a strong relationship between fuel prices and prices of
commodities (X17), Petrol/fuel price rise may result in rise in price of domestic gas (X18) & Oil price fall in the
international market have resulted in the withdrawal of Government subsidy on electricity (X19). Therefore, the fourth
factor is labelled as “Impact of Petrol/Fuel prices rise onother sectors”.

The variables (X20, X21, X22) that loads on the fifth factor relates to: Oil price fall in the international market
have resulted in job cuts in many sectors as production goods and services are badly hit (X20), Oil price fall in the
international market have resulted in lower investment in infrastructure projects in Oman(X21) & Petrol/fuel price for
domestic consumption have been increased to bridge the deficit, due to oil price fall in the international market (X22).
Therefore, the fifth factor is labelled as “International Crude Oil price fall and its impacts on other sectors”.

The analysis of the data proves that the initial questionnaire prepared comprises of five overriding factors on to
which, other variables/factors are loaded. They are:

• Crude oil prices, revenues in the international market and income level of consumers.

• Petrol price rise and car ownership

• Public transport system and decision to purchase cars

• Impact of Petrol/Fuel prices rise on other sectors

• International Crude Oil price fall and its impacts on other sectors

Figure 1: Factors and its Impact on Sale of Cars

Impact Factor (JCC): 7.3125 NAAS Rating: 3.43

Domestic Fuel Price Hike and Purchase of Cars in Wilayat of Nizwa 11
Sultanate of Oman a Factor Analysis Approach

The first, second and third factors are considered very strongly loaded with other variables/factors as is evident
from the Rotated Component Matrix in table 7.

Findings of the Study

The most important variable that impacts the respondents is “There is a strong relationship between fuel prices
and prices of commodities (X17)” with the highest mean of 3.86.

75.5 % of the variance is attributed to the statement “There is a need to switch over to cheaper fuel for if prices
keep increasing (X16)”. 75 % of the variance is attributed to the statement “The residents in Wilayat of Nizwa think twice
before making a decision to purchase a high end car due to petrol/fuel price rise(X15)”. 72.8 % of the variance is attributed
to the statement “Oil price fall in the international market have resulted in the withdrawal of Government subsidy on
electricity (X19)”.

It is found that the first five variables (X1, X2, X3, X4& X5) constitute 62.560 % of the cumulative variance.
These variables impact the respondents in pushing the sale of cars in Wilayat of Nizwa.

There were four variables (X1, X2, X3, and X4) heavily loaded on to the first factor and it relates to: Crude oil
prices, revenues in the international markets and income level of consumers and hence labelled as “Crude oil prices,
revenues in the international market and income level of consumers”.

The four variables (X7, X8, X9 & X10) that loads heavily on the second factor relate to: Petrol/fuel price rise and
the difficulty in owning car and hence labeled as “Petrol price rise and car ownership”.

The variables (X12, X13, X14, X15) that loads heavily on the third factor relate to: Public transport system and
car purchase decisions and hence labeledas “Public transport system and decision to purchase cars”.

The variables (X16, X17, X18, X19) that loads on the fourth factor relate to: Relationship of petrol/fuel prices on
other sectors and hence labeled as “Impact of Petrol/Fuel prices rise on other sectors”.

The variables (X20, X21, X22) that loads on the fifth factor relate to: Oil price fall, job cuts, investment in
infrastructure and hence labeled as “International Crude Oil price fall and its impacts on other sectors”.

CONCLUSIONS

The research attempted to understand the fundamental variable that influences the car purchase decisions of the
residents in Wilayat of Nizwa in relationship with other contributing factors. Various factors identified were namely: Crude
oil prices, revenues in the international market and income level of consumers; Petrol price rise and car ownership; Public
transport system and decision to purchase cars; Impact of Petrol/Fuel prices rise on other sectors and finally International
crude oil prices fall and its impacts on other sectors. The study also threw light on the impact of the fuel price rise on other
sectors viz. commodities, gas, job cuts in production and manufacturing sector, subsidy in electricity, investment in
infrastructure, need for an alternate and a cheaper source of fuel etc. It is indispensable for the prospective car purchasers
to make a purchase decisions taking into consideration the various factors that may impact their decision.

Future Direction of the Study

There was no known study conducted in this domain, and there was a felt need by the researchers to conduct a
study to update the automobile marketers on the current findings. The researchers identified the overriding factors that

www.tjprc.org editor@tjprc.org
12 Radhakrishnan Subramaniam, Harith Ahmed Al-Balhasani &
Mohammed Ali Al-Busaidi

influence the car purchase decision of the current and prospective customers in Wilayat of Nizwa. Researchers recommend
automobile marketers to address the issue of fuel price hike to their parent producers and innovate the products in terms of
features that would give mileage efficiency for the current and prospective customers who purchasecars. There is a scope
of extending the study on the behavior of existing and prospective customers in terms of their quantity of consumption of
fuel in the light of fuel price hike.

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Impact Factor (JCC): 7.3125 NAAS Rating: 3.43